Explanatory note

Section 72(3) of the Local Government, Planning and Land Act 1980 limits the prescribed expenditure of a local authority, and other bodies to whom Part VIII of the Act applies, to the aggregate of various amounts including its net capital receipts. “Prescribed expenditure” is expenditure, essentially of a capital nature, described in Schedule 12 to the Act.

The disposal of assets mentioned in section 75(2) of the Act gives rise to capital receipts, from which net capital receipts are derived. The Secretary of State may by regulations provide that the disposal of specified classes of assets does not give rise to capital receipts or gives rise to such receipts only to the extent specified in the regulations. Regulations may also provide that particular expenditure is not to be prescribed expenditure.

Regulation 4 of the Local Government (Prescribed Expenditure) (Consolidation and Amendment) Regulations 1987 lists certain classes of assets on the disposal of which no capital receipt arises. These Regulations, which will cease to have effect on 1st October 1988, make further additions to the list. They relate to situations where no prescribed expenditure was incurred on acquiring the asset.

Regulation 6 and paragraph 3 of Part I of Schedule 3 to the 1987 Regulations provide that, except in the case of a building lease, expenditure on the acquisition of leases of less than twenty years does not constitute prescribed expenditure. These Regulations provide that, in future, only expenditure on leases of three years or less and leases which succeed certain other interests will not constitute prescribed expenditure; and then only in the circumstances specified in these Regulations.